What is gap insurance?


You may be unaware that when you buy a car the price you had paid and the amount of your car decreases as soon as you drive it off the lot. And when the price of your car when you are already using it is much lower than the price before you bought it, it may also be that some car insurance company will also insure your car based on the price when you are already using it, which is much cheaper. That is why it is advisable that when purchasing car insurance for your vehicle that you check the policies of your auto insurance carefully, make sure that your insurance policy will insure your car with the same price as before you bought it. Because when your car is totaled from an accident or loss due to theft, you may just receive amount from your car insurance that is quite lower than what your car’s real price. You should know that when your loss is because of accident or theft, it does not also make your car loan to just disappear; you would still end up owing the car lender the amount of cash you borrowed from them. And when you use the money you got from your insurance company to pay up for the car loan you had for your car gone, you will be ending up having a balance with your car lender. This balance would be the ‘gap’. In case like this happens, GAP car insurance comes into place.

Car insurance does not cover the amount your car reduced when you bought it from its original price. That is why there is GAP car insurance. GAP car insurance is the extra insurance that will protect drivers who have car loans in case that the car is lost from accident, acts of God, or theft. So in case your car is totaled from a severe storm or stolen by criminals, you get from the car insurance company the amount they cover and pay it to your car lender. Simply put, the money you get from the car insurance company (from which you have GAP) is then used to pay your loan to the car lender. And because GAP car insurance is not an automatic addition to your normal car insurance policy, you should ask for your car insurance company agent about it before you acquire your car insurance.